Climate change headache for Key

John Key says the current emissions trading scheme has to change. Photo / Greg Bowker

The Government faces a headache in introducing an important part of its climate change policy on time after a divisive parliamentary inquiry exposed the unwillingness of National's partners to back its plan for cutting greenhouse gas emissions.

National wants to make sweeping changes to the Emissions Trading Scheme, but to do so will have to make a deal with Act or the Maori Party, both of which want a different system.

Its other alternative is to seek support from Labour and the Greens, who introduced the scheme last year and do not want big changes.

National's problem is further complicated by an end-of-year deadline, when the current scheme will require the energy and industrial sectors to pay for greenhouse gas emissions.

National will also want to have its plan ready before December's United Nations climate change conference in Copenhagen.

The differing positions in Parliament were outlined in a review of the scheme made public yesterday.

Prime Minister John Key said some sort of law change was required before January 1, at least to suspend the start date for the emissions payments.

He expected this would take "meaty negotiations".

But the current scheme had to change, Mr Key said, because "it would have a dramatic effect on our economy, would have a significant increase in the prices paid by consumers, and it will cost jobs".

There was a difference between Act and the Maori Party "preferring" a carbon tax, and a compromise under which they accepted an amended Emissions Trading Scheme (ETS).

Mr Key said all possible support partners had to look at what the effect would be if they did not give their backing.

Labour had to be careful it did not force National into a position where it would abolish the ETS, the Maori Party had to think about its wider constituency - which had a real interest in an ETS that worked - and Act had to consider whether it wanted to leave National saddled with the current scheme, the Prime Minister said.

Greens MP Jeanette Fitzsimons said the review was designed as a sop to Act leader Rodney Hide and a way for National to buy time on its climate change measures.

If National could not get a law change through Parliament before January 1, there would be "a certain amount of chaos" because of the uncertainty it would cause the energy industry over how to comply with the current law, she said.

The Government would be embarrassed going to Copenhagen with its climate change policy a "complete mess", Ms Fitzsimons said.

"The only thing that would look worse would be a seriously weakened ETS that they could only get through with the support of the climate change-denying party [Act]."

Labour's climate change spokesman, Charles Chauvel, said the party was "fairly flexible" on possible amendments and was willing to work with the Government to get the Emissions Trading Scheme "off the political battlefield once and for all".